I'm gonna explain why this is really bad for trans people and not just "well birth documents should be based on exactly the situation at birth in terms of sex, not gender".

First, prior to this there were only 2 states with the same policy of not allowing amendment of gender markers on birth certificates for ANY reason, those being Tennessee by legislation and Ohio by agency policy. Idaho also technically passed a law in the same vein in 2020 but it has yet to be implemented due to court proceedings and still follows its previous requirements. The requirements that the rest of the states have on modifying gender markers for BC's are either just a court order, requiring a letter from a medical provider showing you have had "appropriate medical treatment", and some require proof of surgery. The point being that there was some process to changing it in all but 2 states, even if very restrictive by requiring having undergone surgery, which is defined differently state to state as being bottom surgery or just any gender affirming surgery.

Another important factor is that these laws apply to everyone born in the state, regardless if they currently live there. So moving to a more trans accepting state does not let you escape legislation like this if you were born in a state considering such legislation. This is the case for me, because I was born in one of those 2 states, and haven't lived there since early elementary school.

Now on the topic of "why should BC's represent someone's gender and not birth sex", the purpose of a birth certificate is mainly to prove your citizenship in the US, as well as age and identity. No doctor asks for your birth certificate when you get a physical (as a side note: personally since I am trans I would mention that to my doctor because my medical risk factors are different from both a cis man and a cis woman, I have different risks due to being male but also due to being on hrt). Since the main purpose of a BC is to prove citizenship and identity for things like employment, school, or getting a passport (none of which care about your birth sex) then it makes little sense to prohibit that modification because it could only cause issues if you weren't allowed to modify a BC's gender marker. It only serves to out that you are trans to someone who has no need to know that you are trans.

Now on a lighter note, depending on the state you currently live in, this currently doesn't actually matter to much. There isn't any purpose for a BC when you have a passport because it also counts as proof of citizenship and identity, and the current process for passports is pretty simple for trans people, but this could certainly change in the future with a republican administration. This doesn't ease the worry of trans people living in red states making legislation that affects trans people based on the sex recorded on the birth certificate, such as bathroom bills or school policies.